UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined balance sheet presents the historical balance sheets of Q Therapeutics, Inc. (Q Therapeutics) and Grace 2, Inc. (Grace 2) as of June 30, 2011, and accounts for the transaction as a recapitalization of Q Therapeutics with the issuance of shares for the net assets of Grace 2 (a reverse acquisition) based on the information and assumptions set forth in the Notes to Unaudited Pro Forma Condensed Combined Financial Statements, and giving effect to the transaction as if it had occurred as of June 30, 2011. The transaction was completed on October 13, 2011.
The Grace 2 balance sheet information was derived from its unaudited balance sheet as of June 30, 2011 that is included in the Form 8-K. The Q Therapeutics balance sheet information was derived from its unaudited balance sheet as of June 30, 2011 that is included in this Form 8-K.
The unaudited pro forma condensed combined statements of operations are based on the historical statements of operations of Q Therapeutics and Grace 2 and combine the results of operations of Q Therapeutics and Grace 2 for the six months ended June 30, 2011 and for the year ended December 31, 2010, giving effect to the transaction as if it occurred on January 1, 2010, and reflecting the pro forma adjustments expected to have a continuing impact on the combined results. The historical results of operations of Grace 2 were derived from Grace 2’s unaudited statement of operations for the six months ended June 30, 2011 and the unaudited statement of operations for the year ended December 31, 2010.
The historical results of operations of Q Therapeutics were derived from its unaudited statement of operations for the six months ended June 30, 2011 and its audited statement of operations for the year ended December 31, 2010 that are included in this Form 8-K.
The unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the merger been completed on the assumed date or for the periods presented, or that may be realized in the future. Furthermore, the pro forma financial information does not reflect the impact of any reorganization or restructuring expenses or operating efficiencies resulting from the transaction. The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above.
| Unaudited Pro Forma Condensed Combined Balance Sheet |
| June 30, 2011 |
Q Therapeutics, Inc. | Grace 2, Inc. | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||
| Assets | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash | $ | 51,326 | $ | - | $ | 150 | [E] | $ | 51,476 | ||||||||
| Grants receivable, net of an allowance for doubtful accounts of $14,531 | 2,628 | - | - | 2,628 | |||||||||||||
| Total current assets | 53,954 | - | 150 | 54,104 | |||||||||||||
| Property and equipment, net | 42,824 | - | - | 42,824 | |||||||||||||
| Other assets | 7,513 | - | - | 7,513 | |||||||||||||
| Total assets | $ | 104,291 | $ | - | $ | 150 | $ | 104,441 | |||||||||
| Liabilities and Stockholders' Deficit | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable | $ | 351,842 | $ | 68,000 | $ | - | $ | 419,842 | |||||||||
| Accrued liabilities | 62,030 | 20,000 | - | 82,030 | |||||||||||||
| Notes payable to stockholders | 15,000 | 69,170 | - | 84,170 | |||||||||||||
| Total current liabilities | 428,872 | 157,170 | - | 586,042 | |||||||||||||
| Commitments and contingencies | |||||||||||||||||
| Stockholders' deficit: | |||||||||||||||||
| Series A1 convertible preferred stock: $0.0001 par value; 250,000 shares authorized; 250,000 shares issued and outstanding | 25 | - | (25 | ) | [A] | - | |||||||||||
| Series A2 convertible preferred stock: $0.0001 par value; 2,400,000 shares authorized; 2,022,190 shares issued and outstanding | 202 | - | (202 | ) | [A] | - | |||||||||||
| Series B convertible preferred stock: $0.0001 par value; 7,000,000 shares authorized; 4,102,654 shares issued and outstanding | 410 | - | (410 | ) | [A] | - | |||||||||||
| Common stock: $0.0001 par value; 20,000,000 shares authorized; 1,593,203 shares issued and outstanding | 159 | - | (159 | ) | [A] | - | |||||||||||
| Common stock: $0.0001 par value; 100,000,000 shares authorized; 19,837,941 shares issued and outstanding | 110 | 1,724 | [A] | 1,984 | |||||||||||||
| 150 | [E] | ||||||||||||||||
| Additional paid-in capital | 15,238,659 | 9,784 | (928 | ) | [A] | 14,945,148 | |||||||||||
| (167,064 | ) | [B] | |||||||||||||||
| (135,303 | ) | [C] | |||||||||||||||
| Notes receivable from stockholders' | (135,303 | ) | 135,303 | [C] | - | ||||||||||||
| Accumulated deficit | (15,428,733 | ) | (167,064 | ) | 167,064 | [B] | (15,428,733 | ) | |||||||||
| Total stockholders' deficit | (324,581 | ) | (157,170 | ) | 150 | (481,601 | ) | ||||||||||
| Total liabilities and stockholders' deficit | $ | 104,291 | $ | - | $ | 150 | $ | 104,441 | |||||||||
See notes to unaudited pro forma condensed combined financial statements.
| Unaudited Pro Forma Condensed Combined Statement of Operations |
| For the Six Months Ended June 30, 2011 |
Q Therapeutics, Inc. | Grace 2, Inc. | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||
| Grant revenue | $ | 10,173 | $ | - | $ | - | $ | 10,173 | |||||||||
| License revenue | 14,400 | - | - | 14,400 | |||||||||||||
| 24,573 | - | - | 24,573 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 277,432 | - | - | 277,432 | |||||||||||||
| General and administrative | 340,673 | 65,000 | - | 405,673 | |||||||||||||
| Total operating expenses | 618,105 | 65,000 | - | 683,105 | |||||||||||||
| Operating loss | (593,532 | ) | (65,000 | ) | - | (658,532 | ) | ||||||||||
| Other income (expense): | |||||||||||||||||
| Other expense | (1,691 | ) | - | - | (1,691 | ) | |||||||||||
| Other income | 1,588 | - | - | 1,588 | |||||||||||||
| Total other expense, net | (103 | ) | - | - | (103 | ) | |||||||||||
| Loss before provision for income taxes | (593,635 | ) | (65,000 | ) | - | (658,635 | ) | ||||||||||
| Provision for income taxes | - | - | - | - | |||||||||||||
| Net loss | $ | (593,635 | ) | $ | (65,000 | ) | $ | - | $ | (658,635 | ) | ||||||
| Net loss per common share (basic and diluted) | $ | (0.29 | ) | $ | (0.03 | ) | |||||||||||
| Weighted average number of common shares | 1,500,000 | [E] | |||||||||||||||
| (basic and diluted) | 221,547 | 17,237,941 | [D] | 18,959,488 | |||||||||||||
See notes to unaudited pro forma condensed combined financial statements.
| Unaudited Pro Forma Condensed Combined Statement of Operations |
| For the Year Ended December 31, 2010 |
Q Therapeutics, Inc. | Grace 2, Inc. | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||
| Grant revenue | $ | 421,241 | $ | - | $ | - | $ | 421,241 | |||||||||
| License revenue | 31,000 | - | - | 31,000 | |||||||||||||
| 452,241 | - | - | 452,241 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 501,900 | - | - | 501,900 | |||||||||||||
| General and administrative | 826,330 | 44,907 | - | 871,237 | |||||||||||||
| Total operating expenses | 1,328,230 | 44,907 | - | 1,373,137 | |||||||||||||
| Operating loss | (875,989 | ) | (44,907 | ) | - | (920,896 | ) | ||||||||||
| Other income (expense): | |||||||||||||||||
| Other expense | (3,402 | ) | - | - | (3,402 | ) | |||||||||||
| Other income | 14,541 | - | - | 14,541 | |||||||||||||
| Total other income, net | 11,139 | - | - | 11,139 | |||||||||||||
| Loss before provision for income taxes | (864,850 | ) | (44,907 | ) | - | (909,757 | ) | ||||||||||
| Provision for income taxes | - | - | - | - | |||||||||||||
| Net loss | $ | (864,850 | ) | $ | (44,907 | ) | $ | - | $ | (909,757 | ) | ||||||
| Net loss per common share (basic and diluted) | $ | (0.45 | ) | $ | (0.05 | ) | |||||||||||
| Weighted average number of common shares | 1,500,000 | [E] | |||||||||||||||
| (basic and diluted) | 100,000 | 17,237,941 | [D] | 18,837,941 | |||||||||||||
See notes to unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS
On October 13, 2011, Grace 2, Inc. and Q Therapeutics, Inc. entered into an Agreement and Plan of Merger wherein Grace 2, Inc. acquired 100% of Q Therapeutics, Inc.’s capital stock through the issuance of Grace 2, Inc. common stock. As a result of this transaction, Q Therapeutics, Inc. merged with and into Grace 2, Inc., the surviving entity. After the effective date of the transaction, the former Q Therapeutics, Inc. stockholders own 89.7% of the issued and outstanding common shares of Grace 2, Inc. Also, at the time of the transaction Grace 2, Inc. was renamed Q Holdings, Inc. The transaction has been accounted for as a reverse acquisition.
Pro forma adjustments to the attached financial statements include the following:
| [A] | To eliminate the Q Therapeutics, Inc. common and preferred stock for consolidation and to record the acquisition of Q Therapeutics, Inc. by Grace 2, Inc. through the issuance of 17,237,941 shares of Grace 2, Inc. common stock. The interests of the former stockholders of Q Therapeutics, Inc. in the combined enterprise will be greater than that of the existing stockholders of Grace 2, Inc. and the management of Q Therapeutics, Inc. will assume operating control of the combined enterprise. Consequently, the acquisition will be accounted for as the recapitalization of Q Therapeutics, Inc., wherein Q Therapeutics, Inc. purchased the assets of Grace 2, Inc. This is a reverse acquisition for accounting purposes. |
| [B] | To eliminate the accumulated deficit of Grace 2, Inc. at the date of acquisition to reflect the recapitalization for accounting purposes. |
| [C] | To record elimination of Q Therapeutics, Inc.’s stockholders’ notes receivable. |
| [D] | To reflect the issuance of 17,237,941 shares of Grace 2, Inc. common stock to facilitate the acquisition, as adjusted for the weighted average calculation. |
| [E] | To record the issuance of 1,500,000 shares of Grace 2, Inc. common stock issued for $150 on August 8, 2011 as if the shares were issued and outstanding as of June 30, 2011. |